Ukraine's GDP Drops to 72% of Pre-War Levels as Millions Lose Jobs and Face Poverty

Ukraine's economy has been hit hard by the ongoing conflict with Russia, with the country's GDP in 2023 falling to just 72% of its 2021 levels. Millions of Ukrainians have lost their jobs or faced pay cuts, pushing many into poverty, especially those who were already struggling before the war began.

The hardest hit are the elderly, the disabled, and the displaced, with 9% of Ukrainians running out of food and 23% in a state of food insecurity. Pensioners and those receiving disability benefits have seen their incomes severely eroded, with average monthly pensions equivalent to just $135.

The war has caused widespread poverty, but Ukrainian society is less fragmented than Western counterparts, with family safety nets helping to a greater extent. However, the loss of homes and livelihoods has tipped many into poverty, and the country needs $37.3 billion in external financing for 2024, which may lead to cuts in social spending and increases in energy prices.

The war's impact on the economy and impoverishment of the population is seen as part of Vladimir Putin's plan to grind Ukrainians down on the front and behind it. The U.S. and other partners have started working on Ukraine's economic recovery, including creating a Multi Donor Coordination Platform to enable private sector investment.

Ukraine's economy is showing some resilience, with GDP expected to grow around 4% in 2024 and investment increasing by 17% in 2023. However, Ukraine's military and economic situation remains dire, with supplies of air defense munitions and artillery shells dwindling.

The U.S. administration is calling for Congress to pass a multi-billion dollar aid package to provide crucial security, economic, and humanitarian support to Ukraine. Ukraine's central bank has also devalued the hryvnya by 25% due to the deep economic impact of the war with Russia, with the new official exchange rate set at 36.5686 to the U.S. dollar.

Why this matters: The ongoing war in Ukraine has had a devastating impact on the country's economy and its citizens, with millions pushed into poverty and facing food insecurity. The international community's support will be crucial in helping Ukraine recover and rebuild in the face of this ongoing crisis.

According to the National Bank of Ukraine (NBU), Ukraine's GDP in 2023 was 72% of 2021 levels, with the recovery of the economy expected to continue, although it will be restrained, primarily due to significant damage to energy facilities. The NBU predicts a further recovery of economic activity, taking into account the recent changes in the issue of receiving international aid and the expected revival of domestic and foreign demand.

"The war has significantly changed the fundamental characteristics of Ukraine's economy, and the previous official exchange rate no longer reflects reality," the central bank said, noting that the devaluation is aimed at anchoring the economy and providing stability amid the uncertainty.

Key Takeaways

• Ukraine's GDP fell to 72% of 2021 levels due to the Russia conflict.
• Millions of Ukrainians have lost jobs/faced pay cuts, pushing many into poverty.
• Ukraine needs $37.3B in external financing for 2024, risking social spending cuts.
• Ukraine's central bank devalued the hryvnya by 25% due to war's economic impact.
• International support crucial for Ukraine's economic recovery and rebuilding.